Don’t Make a Monkey Out of Me: S&P 500 Weathers Storm, Small Caps Fall Most Since 2011

By Ben Levisohn

The Planet of the Apesis back–and better than ever, if the critics are too be believed. The new Dawn of the Planet of the Apes is set 10 years after the events of Rise of the Planet of the Apes, where a search for the cure to Alzheimer’s killed much of the human population. Apes are ascendant, humans struggling for survival. And of course they fight. A lot. But it’s more than that. Slate’sDana Stevens calls it “one of the most intelligent and entertaining big-studio releases of the summer so far.” The Christian Science Monitor’s Peter Rainer touts it as “a thinking person’s fantasy film” that “doesn’tseem like a fantasy at all.” The Globe and Mail’sDave McGinnsimply writes, “It’s incredible.” That might not be enough to make Dawn of the Planet of the Apes a blockbuster–Box Office Mojoprojects it will earn more than $50 million but less than $75 million–but it certainly sounds like a film worth seeing.

WETA

Will the stock market make a monkey out of investors? That was the worry earlier this week, when the market slid on Fed fears and European bank concerns. But for all the Sturm und Drang the S&P 500 fell just 0.9% to 1,967.57. Sure, that was the worst weekly drop since April, but in the grand scheme of things, not much to get worried about.

The Dow Jones Industrial Average, meanwhile, fell 0.7% to 16,943.81, and the Nasdaq Composite dropped 1.6% to 4,415.49. The only worrisome decline came in the small-company Russell 2000, which plunged 4% to 1,159.93, its biggest weekly decline since November 2011. Ouch.

The folks at Bespoke Investment Group point out the one “clear trend” has been the one that sees jumps in sentiment followed by market declines:

This trend where investors begrudgingly become more bullish only to see the market sell-off moderately once they do has been a clear trend during this bull market. If the trend continues, we would expect sentiment to take a turn for the worse next week as investors have been slow to embrace rallies and quick to jump to the sidelines. It is a pattern that we have seen throughout this bull market. As we have stated time and time again throughout this bull, as long as the investor class remains skeptical of equities as an asset class, the rally should remain on firm footing. If we start to see bullish sentiment remain high even on pullbacks like the one we’ve experienced this week, then it might be time to raise some cash and look for a more extended correction.

Strategas Research’s Chris Verrone and Todd Sohn state the obvious: Stick with large-caps:

While price action has been modestly distributive this week, the good news is that internal trends remain supportive with 81% of the S&P still in an uptrend. The leadership backdrop also remains decent with the MS Cyclical Index continuing to chart fresh relative highs as credit conditions remain benign (BBB spreads are sitting near cycle lows). Now as we’ve been highlighting most of the year, things do certainly get more selective down the cap scale (small-caps are still underperforming this year), so we would continue to favor a large vs. small bias.

About Stocks To Watch

Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.